(def.) A business environment defined by (1) an expectation of total informational transparency and accessibility and (2) a requirement for flawless logistics and operations. Named for Google and Wal-Mart. (c)Josefowicz Associates, LLC

Friday, October 06, 2006

And then there is the infrastructure business

In fact, Maersk reveals little more about its activities than the minimum required by the Copenhagen Stock Exchange and says almost nothing about its corporate strategy. But the Copenhagen-based group’s $38bn annual revenues last year make it not much smaller than Microsoft, the software giant....As the largest company in the sector, Maersk is a key driver of the reduction of the costs of ocean shipping that has been under way since the container was invented in 1956. The process has been crucial to making globalisation possible and has driven costs down so far that it often now costs more to ship a container by road 100 miles from a port to its final destination than it does to move the container by sea from China to Europe.

When it costs less to move a container across the ocean than 100 miles inland, what does that do to the definition of space?

The most important goal they identify is that Maersk should control as many as possible of the companies that influence its containers’ movement from country to country. The other is to pursue scale – both in the size of the company’s main businesses and in its ships.

The company can be single-minded in pursuit of these objectives because it is largely immune from short-term shareholder pressure. The founding McKinney-Møller family holds 55 per cent of the shares and 75 per cent of voting stock, with 49.8 per cent of the shares all held by a single family charitable trust.

When a private company can be this successful, what does that mean for the comparative advantage of a public corporation?